Lefroy Exploration reckons it has over 600,000oz of gold, but investors are not buying it

Nick Sundich Nick Sundich, May 16, 2023

Lefroy Exploration (ASX:LEX) has unveiled its maiden Mineral Resource Estimate (MRE) for its Burns Deposit. It has 602,302/oz gold and 58,300 of copper. Sounds good doesn’t it? So, why does the stock keep going down?

 

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Has Lefroy Exploration made progress in 2 years?

Yes, of course it has. But the devil is in the details and it is why shareholders haven’t re-rated it to the extent Chalice (ASX:CHN) or De Grey (ASX:DEG) shareholders did. Let’s go back to February 23 2021, a day on which shares leapt from 20.5c to as high as 90c intraday before closing at 69 cents.

 

Lefroy Exploration (ASX:LEX) share price chart, log scale (Source: TradingView)

 

Lefroy Exploration found a 60m copper-gold intersection at the Burns prospect at its Lefroy Gold Project what graded 60m at 5.22g/t gold and 0.38% copper. Keep in mind that Burns was not originally part of the project but it was picked up by the company in late 2019. Shareholders suspected more was to come, especially since several other companies had tried but failed at Burns (as high profile as BHP in 1985 and Newmont in 2007).

Since then it has been slow, but steady progress leading to the Mineral Resource Estimate. And the company is targeting a 1Moz Resource eventually.

 

Why the hold up?

We would note two issues.

First, the project is low-grade with an average 0.42%. Keep in mind that anything below 1% is typically low-grade, but above 5% is high-grade. Granted, the Red Dale and Lucky Strike prospects have 1.18% and 1.95% respectively, but burns has just 0.36% even though it has 497kt of the 602kt resource.

Second, 25% of the resource lies in the lower confidence Inferred resource category. While the balance lies in the Implied category, this is lower than the Measured Resource category. Although Lefroy Exploration can reasonable assume geological and grade continuity to support general mine planning, it is not yet confirmed and cannot support more detailed mine planning.

And third, gold is not as in vogue with investors as it was in 2020 when De Grey (ASX:DEG) found its Hemi deposit. Gold Road (ASX:GOR) depicts that gold companies can develop projects even when gold is not in vogue, although it is still hard work and even harder for investors to be patient than in good times.

Lefroy Exploration investors in 2021 were hoping it would rise as fast as De Grey (ASX:DEG) did in 2020 (from 5c to over $1 in less than 12 months). Lefroy may still reach greater highs than it is now, but has some work to do yet.

 

 

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